State supported bank rescue without state aid control – the UBS/Credit Suisse case

On Sunday, 19 March 2023, the Swiss government (the Federal Council) decided to support the takeover of Credit Suisse by UBS. One can only wonder how things would have turned out if there had been a state aid regime in place in Switzerland.

Switzerland has no binding, cross-sector state aid control system. A review of state aid measures is only foreseen for the air transport sector, where the Swiss Competition Commission (WEKO) has the task of issuing opinions on proposed state aid measures. The assessment by the Competition Commission has no binding effect and is not associated with any enforcement powers. For the EU, the lack of a Swiss state aid regime has long been problematic. The EU would like to see Switzerland adopt the EU “acquis” in this area and set up a state aid surveillance authority with the power to issue binding rulings.  According to the EU, this would be essential to guarantee a level playing field. 

In the case of Credit Suisse, the absence of state aid control meant that the Swiss Federal Council was under no obligation to consider state aid principles and rules when deciding on the need for state support. The Federal Council was therefore spared additional complications in its decision-making. It did not have to deal with the far-reaching nature of state aid law, the application of which can have drastic effects, for example when it comes to weighing up a temporary nationalisation against a state-supported merger, or deciding on the appropriate level of bail-in by creditors. Also, the Federal Council did not need to seek the approval by an independent state aid supervisory authority.

Sooner or later the Swiss government will have to face the decision of whether or not Switzerland should yield to the EU’s demand to adopt the “acquis” on state aid, initially in the electricity and other selected sectors, and in the longer term potentially on a broader scale. On this occasion, the government will also have to consider whether it makes sense to copy EU state aid law as it is or whether Switzerland should retain a certain discretion to decide independently on the design of its own state aid regime. Considering the potentially far reaching nature of state aid law, Switzerland has no interest in making things easy for the EU.